Corporate Taxes

Landlord Taxes, Rental Expenses, Property Tax Deductions

The High Court decision in Revenue Commissioners v Thomas Collins has just been published.  It states that contrary to Revenue’s position, the NPPR (Non Principal Private Residence) charge was in fact an “allowable” expense against rental profits under Section 97(2) TCA 1997.

What was the NPPR Charge?

The NPPR (Non Principal Private Residence) charge was an annual charge of €200.  It was implemented by the Local Government (Charges) Act 2009, as amended by the Local Government (Household Charge) Act 2011.

What does it relate to?

It related to all residential property situated in Ireland which was not used as the owner’s sole or principal residence from 2009 to 2013.

Examples of the type of residential properties liable for the NPPR charge were:

• private rented properties including houses, maisonettes, flats, apartments or bedsits.

• vacant properties – This definition excluded new but unsold residences in situations where they had never been used as a dwelling houses but instead were deemed to be part of the trading stock of a business.

• holiday homes or second homes.

Previous Tax Treatment of NPPR

Irish Income Tax is calculated on the net amount of rents received or rental profits.  In other words Income Tax is charged on the gross rents received less any allowable expenses, as specified in the Taxes Consolidation Act 1997.

The main deductible expenses include:

• Interest on money borrowed to purchase, repair or improve the property,

• Any rent payable by the landlord in relation to a sub-lease,

• The cost to the landlord of providing any goods or services to the tenant,

• The cost to the landlord of insurance, repairs & maintenance, property management fees, etc.,

• Local Authority Rates where relevant.

For details of allowable rental expenses, please visit www.revenue.ie/en/tax/it/leaflets/it70.html

What was the Irish Revenue Authorities and the Department of Finance’s stance prior to this ruling?

That the payment of the NPPR charge for residential properties was NOT an allowable deduction in calculating Income Tax on the rental profits.

Effect of this Ruling

If this High Court decision is not overturned, then it could result in a repayment of taxes overpaid.

There is a time limit for claiming refunds of tax overpaid.

All claims for tax refunds must be made within four years of the end of the year to which the claim relates.

If you are a landlord of rented residential property in Ireland seeking tax advice or looking to regularise your tax affairs, and wish to deal with a Property Taxes Specialist please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Corporation Tax, Corporate Taxes, Business Tax Ireland, Capital Gains Tax, CT1 Return

The Irish corporation tax system operates on a self-assessment basis.  Therefore, it is solely the responsibility of the company to calculate and pay its corporation tax liability within deadline.  Any company liable to corporation tax must submit a CT1 Form.  This is a Tax Return containing details of profits, chargeable gains and other relevant information.  This is outlined in Section 884 TCA 1997.

When must the CT1  Return be filed?

(a) It must be filed within nine months of the end of the company’s accounting period but

(b) no later than the 23rd day of the month

(c) if the Tax Return along with payment of the associated tax liability is filed via the Revenue Online Service.

(d) Otherwise, the Return must be filed within eight months and twenty one days of the company’s year-end.

For Example:

A company with a 31st December 2016 year-end must file its CT1 form on or before 21st September 2017.  This is unless it files its Return and the relevant tax payment using the Revenue Online Service.  In that case the deadline date is extended to 23rd September 2017.

Can an Accounting period be longer than 12 months?

An accounting period for CT purposes cannot be longer than twelve months.

What happens if a company has two accounting periods?

If a company has an accounting period of say, 15 months for example, then it is deemed to have:

(a)   Two accounting periods for Corporation Tax purposes and

(b)   Two Preliminary Tax payment dates.

How would that work?

(a) The first accounting period would be for the first twelve months.

(b) The second accounting period would be for the remaining three months.

Consequences of filing a late or incomplete/incorrect CT Return

The following surcharges will apply:

(i) If the Corporation Tax Return is filed less than two months late, a 5% surcharge (subject to maximum of €12,695) will be calculated on the company’s CT liability for the accounting period in question.  This surcharge will apply irrespective of whether the tax had been paid within deadline because this surcharge arises in relation to the late filing of the CT1 Form.

(ii) If filed more than two months late, a 10% surcharge (subject to maximum of €63,485) will be levied on the company’s tax liability for the period in question regardless of whether or not the tax had been paid on time.

Please be aware that the surcharge also includes any Income Tax due.

Is there anything else to keep in mind?

In addition to the above surcharges, in circumstances where a company does not submit its return on time, the following restrictions on the use of certain allowances and reliefs will also apply:

(i) If filed less than two months late, the reliefs and allowances will be restricted by 25%.  This is subject to a maximum of €31,740 in each case,

(ii) If filed later than 2 months, the reliefs and allowances are restricted by 50%.  This subject to a maximum of €158,715 in each case.

What about Group Relief?

For Group Relief to apply, both the surrendering and the claimant company must have submitted their Corporation Tax Returns within the deadline date.

Interaction with Local Property Tax 

A surcharge of 10% will be levied on the final liability where the CT1 Return has been filed on time but where the LPT Return or payment is outstanding at the CT filing date.  This surcharge will also be levied if an agreed payment arrangement for LPT has not been set up.  Finally, if the company subsequently pays its LPT liability in full, bringing its tax affairs up to date, the amount of the surcharge will be capped at the amount of the LPT liability involved.

 Preliminary Tax

In Ireland, companies are required to prepay a portion of their corporation tax liability. This is known as “Preliminary Tax”.  The rules for calculating Preliminary Tax depends on whether a company is considered to be a “small company” or a “non-small company”.

What’s a “small company”?

For preliminary tax purposes it’s a company whose corporation tax liability for the previous twelve month accounting period did not exceed €200,000.

How is it’s Preliminary Corporation Tax calculated?

A company which qualifies as a “small company” has the option of computing its preliminary CT payment on the lower of:

(a) 90% of the total estimated corporation tax liability for the current period, or

(b) 100% of the final corporation tax liability for the previous period.

When can a “small company” pay it’s Preliminary Tax?

It has the option of paying its Preliminary Tax one month before the end of its accounting period.  This is provided it’s on a date no later than the 23rd day of the month.

What about the balance of outstanding tax?

It must be paid on or before the company’s tax return filing date.  In other words, on the 23^rd day of the ninth month following the end of the accounting period.

Example:

If the accounting period ended on 31^st December 2016, the balance of the tax would be payable by 23^rd September 2017.  This is provided the Return and payment were made via ROS.  Otherwise, it would be on or before 21^st September 2017.

Which is the most advisable option to choose?

It is advisable to choose the second option.   By paying 100% of the previous year’s CT liability, this ensures that no underpayment will have been made by the Company thereby avoiding exposure to interest penalties.

What happens if sufficient Preliminary CT isn’t paid or is not paid on time?

Please be aware that if the company doesn’t pay sufficient preliminary corporation tax or if the preliminary tax is not paid on time, an interest charge will be levied.   A daily simple interest rate of 0.0219% will arise on the difference between:

(a) 100% of the final CT liability and

(b) The amounts paid over to the Irish Revenue Authorities.

What about companies not deemed to be “small Companies”?

For companies which are not deemed to be “small companies” the following rules will apply:

The first preliminary tax payment or “Initial Instalment” falls due no later than the 23rd day of the sixth month from the commencement of the chargeable period. The payment due is the lower of:

(a)   50% of the previous periods corporation tax liability or

(b)   45% of the current year’s liability.

The second preliminary tax payment or “Final Instalment” falls due no later than the 23rd of the month preceding the end of the chargeable period (i.e. by the 23^rd day of the eleventh month of the accounting period). This payment must bring the total preliminary tax payment submitted to the Revenue Authorities to at least 90% of the total tax payable for the current chargeable period including the tax on any chargeable gains.

The company must file its CT1 Return and pay the balance of the Corporation Tax (i.e. the remaining 10%) no later than the 23^rd day of the ninth month after the chargeable period ends.

If you are a Business Owner looking to incorporate or a Director/Shareholder seeking comprehensive tax advice or looking to regularise your tax affairs, and wish to deal with a Corporate Taxes Specialist please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

If you intend to set up a new company in Ireland in 2017, please be aware that you must register with the Irish Revenue Authorities.  Registration must be within thirty days of incorporation.  This can be done by completing the relevant sections of a TR2 Form:

http://www.revenue.ie/en/tax/vat/forms/formtr2.pdf

http://www.revenue.ie/en/tax/vat/forms/formtr2-nonresident.pdf

What information is required to register?

1. Your CRO Number – For further information you should contact the Companies Registration Office https://www.cro.ie

2. The company’s year-end.

3. The company’s trading activities.

4. The name of the company, its registered office address and the address of its principal place of business.

5. The name of the Company Secretary.

6. Details of Directors and the main shareholders of the company including their Personal Public Service (PPS) numbers.

Who must file a Form 11F CRO?

Every company which is incorporated in Ireland regardless of its residency.  This includes a foreign incorporated company commencing to carry on a trade or profession in Ireland

To file a Form 11F CRO please click: www.revenue.ie/en/tax/it/forms/11fcro.pdf

It must be filed, with the Irish Revenue Commissioners, within thirty days of commencing to trade.

Are there any additional information required?

Under Section 882(2) TCA 1997 where the company is incorporated but not tax resident in Ireland, the following is required:

1. The country in which the company is resident;

2. The name and address of the company which is trading in Ireland if the Trading Exemption in Section 23A(3) applies.

3. The names and addresses of the beneficial shareholders if the Treaty Exemption under Section 23A(2) applies. If, however, the company is controlled by a company whose shares are traded on a stock exchange in an EU or DTA country then the registered office of that company will be required.

How will the company be taxed?

If your company is deemed to be tax resident in Ireland then it will be liable to tax on its worldwide income/profits in Ireland.  In other words,  not just the profits generated in Ireland.

If it is not deemed to be Irish tax resident, then it will only be liable to Irish tax on Irish source or generated income/profits.

How can you determine the residence of your company?

The first question to ask yourself is how to determine the residence of the company.  The 2014 Finance Act, came into effect on 1st January 2015.  It amended the corporate tax residence rules contained in Section 23A TCA 1997.  The aim was to address concerns about the “double Irish” structure.

How can the legislation be summaried?

• A company incorporated in Ireland will be deemed to be Irish tax resident.

• However, to ensure it complies with how company residence is dealt with in the Double Taxation Agreements, there is an exception to this rule.

• The exception states that if, under the provisions of a Double Taxation Agreement, the Irish incorporated company is deemed to be tax resident in another jurisdiction then that company will not, in fact, be considered to be Irish tax resident.

• A company which was not incorporated in Ireland but is managed and controlled in Ireland will not be prevented from being taxed as an Irish tax resident company according to the amendments to Finance Act 2014.

Are there specific rules for companies incorporated in Ireland before 1st January 2015?

The new provisions apply only from the earlier of the following dates:

a) 1st January 2021 or

b) The date of “change” which takes place after 1st January 2015.

What is meant by the term “change”?

By “change” we mean where there is both:

(a) a change in ownership of the company and

(b) a major change in the nature or conduct of the business activities of the company.

Is there a time span for this change to have taken place?

Within one year before the date of the change or on 1st January 2015, whichever is the later date, and ending five years after that date.

What does this really mean?

It means that companies incorporated in Ireland before 1st January 2015 can use the previous company tax residence legislation until 31st December 2020.

It is essential that up to 31st December 2020, all corporate groups take into consideration the impact of the new legislative provisions on any proposed reorganisations, mergers or acquisitions where there would be:

(a) a change in the ownership and

(b) a change in the nature/conduct of the business in relation to non-resident companies which were incorporated in Ireland.

Tax Rates in Ireland

• Trading Income is taxed at 12½%

• Investment Income including Deposit Interest, Interest on Securities and Rental Income is taxed at 25%.

• Dividends or distributions paid by one Irish resident company to another Irish resident company are known as Franked Investment Income and are not liable to Irish Corporation Tax in the hands of the recipient.

• Foreign Dividends received by Irish resident companies will be subject to Irish corporation tax at 25% in most cases. However, tax at the 12½% rate will apply on dividends received from EU subsidiaries where certain conditions are met under 21B TCA 1997.

• Companies are subject to Corporation Tax on their chargeable gains. The relevant rate of Capital Gains Tax is 33% which is applied to the gain which is then adjusted to an amount which would give the same tax liability using the 12½% Corporation Tax rate. The tax adjusted chargeable gain is the figure to be included in your Corporation Tax calculation.

If you are a Company Director or a Business Owner looking to incorporate, and are looking for up-to-date tax advice or compliance services, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Budget Ireland, Personal Tax, Business Tax, Capital Gains Tax (CGT), Corporation Tax, Cross Border Taxes

Today the Minister for Finance Michael Noonan T.D. delivered Budget 2017.  Until the Brexit negotiations begin, it is impossible to know the impact for Ireland.  However today’s Budget gave Minister Noonan the opportunity to affirm the stability of Ireland’s tax policies, while at the same time introducing measures to promote economic growth.  Unless otherwise stated, the following tax changes will take effect from 1^st January 2017.  We will be examining them under Personal Tax, Business Taxes, Capital Acquisitions Tax, Property Taxes, etc.

PERSONAL TAX

1)   USC Reductions

There will be a half per cent reduction to the first three USC rates i.e. 1%, 3% and 5.5% to 0.5%, 2.5% and 5% respectively.  The aim is to ease the tax burden on low and middle income earners earning up to €70,044 per year.

There will also be an increase in the entry point to the 5% band from €18,668 to €18,772.

There has been no change to the 8% or 11% USC rates.

While the reduction in USC rates is a welcome reduction in the overall tax burden, the top marginal rate for employed individuals with earnings over €70,044 is still 52% and 55% for self-employed individuals with income in excess of €100,000.

2)   Home Carer Credit

There is an increase in the Home Carer Tax Credit by €100, to €1,100 for 2017.

An individual who cares for one or more dependent persons may claim the Home Carer Tax Credit.  These include children, an older person, an incapacitated individual, etc.

Who can claim it?

A jointly-assessed couple in a marriage/civil partnership where one spouse/civil partner cares for one or more dependent individuals.

3)   Earned Income Tax Credit

The Earned Income Credit has increased from €550 to €950.

The tax credit is expected to increase to €1,650 in 2018.  This will see self-employed individuals being on a par with employees, who are currently entitled to a PAYE tax credit of €1,650.

Budget 2016 introduced an Earned Income Tax Credit of €550 for self-employed individuals and includes proprietary directors, with earned income who were not otherwise entitled to the PAYE Tax Credit.

 4)   Deposit Interest Retention Tax (“DIRT”)

The rate of DIRT has been reduced from 41% to 39%.

In his Budget speech, Minister Noonan also committed to reducing the DIRT rate by a further 2% in the next three years until it reaches 33%.

 5)   Fisherman’s Income Tax Credit

Fishermen can claim a new income tax credit of up to €1,270.  This is provided they spend at least 80 days in the tax year, fishing for wild fish or shellfish.

Capital Acquisitions Tax thresholds

The Group A tax-free threshold, which applies primarily to gifts and inheritances from parents to their children, is being increased from €280,000 to €310,000.

Group B threshold, which applies primarily to gifts and inheritances to parents, brothers, sisters, nieces, nephews, grandchildren, etc., is being increased from €30,150 to €32,500.

The Group C threshold, which applies to all relationships other than Group A or B, is being increased from €15,075 to €16,250.

PROPERTY

1.    Help to Buy Scheme

Minister Noonan announced the new “Help to Buy” scheme for First Time Buyers of newly-built houses today.  This new tax incentive is aimed at assisting first time buyers in meeting the acquisition deposit limits set by the Central Bank.  Under this scheme, first-time buyers will receive a rebate of income tax of the previous four years.  The rebate will be up to 5% of the value of a newly constructed home, up to a maximum value of €400,000.

A full rebate (which will be calculated on a maximum of €400,000) will apply to houses valued between €400,000 and €600,000.  In other words, where the new house is valued between €400,000 and €600,000, the rebate will still apply but it will be capped at €20,000.

A rebate cannot be claimed on house purchases in excess of €600,000.

The scheme will be back-dated to cover new houses acquired between 19^th July 2016 and December 2019.

A number of conditions must be met as follows:

The property must be a new build or a self-build.  It must have either been purchased or built as the First Time Buyer’s main or primary residence.

Second-hand properties will not qualify for this relief.

The First Time Buyer must take out a mortgage of at least 80% of the purchase price.

 2.    Interest on rental properties

For landlords of residential property, 100% relief for mortgage interest incurred on the acquisition or development of residential rental properties will be restored on a phased basis over the next five years.

The Relief will increase by 5% per annum, beginning with 80% interest relief in 2017. This change will apply to both new and existing mortgages.

Under this new measure, the relief will be increased by 5% every year over the next five years.  This will ultimately bring the relief in line with that currently available to landlords of commercial property.

3.    Rent-a-Room relief

The annual tax free income limit for Rent-a-Room Relief is being increased by €2,000 from €12,000 to €14,000 per annum for 2017 and subsequent years.

4.    Home Renovation Incentive

The Home Renovation Incentive which offers a tax incentive of up to approximately €4,000 for homeowners wishing to renovate a property has been extended for another two years until the end of 2018.

It was originally introduced in Finance Act 2013 and was due to expire at the end of 2016 but Minister Noonan announced today that this will now be extended to the end of 2018. This is seen as of great benefit to the Irish construction industry.

The rate of credit and the expenditure thresholds remain unchanged.

 5.    Living City Initiative

This Initiative provides tax relief on the refurbishment of properties in designated areas in Ireland’s six cities.

The conditions of the Living City Initiative are being amended as follows:

• Landlords can qualify for the relief where they let qualifying residential property.
• The current cap on the maximum floor space of a residential property has being removed.

BUSINESS TAX

There were a number of welcome changes for business owners in today’s budget:

I.          Revised Entrepreneur Relief

Minister Noonan announced a reduction in the preferential Capital Gains Tax rate, from 20% to 10%, for those qualifying for Entrepreneur Relief on the disposal of certain business assets, including shares, provided conditions are met.

There was no change to the €1m lifetime limit on chargeable gains.

II.     Foreign Earnings Deduction (“FED”)

This scheme which was due to expire in December 2017 has been extended until the end of 2020.

The minimum number of qualifying days spent abroad for Foreign Earnings Deduction Relief has been reduced from 40 days to 30 days.

The list of qualifying countries has been extended to include two additional countries: Colombia and Pakistan.

III.          Share-based remuneration regime for SMEs

The Minister signalled his intention to develop a SME focused, share based incentive scheme which would be introduced in Budget 2018.

The Minister noted that any new regime would have to satisfy EU State Aid rules.

IV.            Start Your Own Business scheme

The Start Your Own Business relief, which was due to expire on 31^st December 2016, has been extended for a further two years.

The cap on eligible expenditure is being increased from €50 million to €70 million, subject to State Aid approval.

AGRI SECTOR

The following changes were introduced for individuals operating in the Agri sector in light of the challenges posed from Brexit:

• The flat-rate addition for VAT unregistered farmers is being increased from 5.2% to 5.4% from 1^st January 2017.

• The extension of the scheme of accelerated capital allowances for energy efficient equipment to sole traders and non-corporates.  Previously this scheme only applied to companies who could claim relief for expenditure on qualifying plant and equipment.

A new income tax payment option for farmers was introduced whereby farmers can opt to ‘step out’ of income averaging to allow for “unexpectedly poor income” and pay tax based on their actual profits in that year.

The tax deferred must be paid in subsequent years however the period over which the deferred tax must be paid is as yet unclear. Therefore this is a tax deferral scheme and not an actual tax saving.  Farmers can opt to avail of this “step out” in 2016.

A new low cost loan fund is to be established for farmers, with an interest rate of less than 3% per annum. These loans will enable farmers to improve their cashflow management and reduce the cost of their short term borrowings.

The CGT relief for farm restructuring was introduced to facilitate sales, purchases and swaps of land parcels and to ensure more efficient farm structures.  Although the terms of the relief remain unchanged, this relief, which was due to expire on 31^st December 2016, has been extended to 31^st December 2019.

Payments under the raised bog restoration incentive scheme will be exempt from Capital Gains Tax.

INTERNATIONAL TAX

Special Assignee Relief Programme (“SARP”)

The SARP regime, which was due to expire at the end of 2017, has been extended for a further three years until the end of 2020.

This Relief exempts 30% of the income of between €75,000 and €500,000 of employees assigned to work in Ireland for a minimum of twelve month provided certain conditions are satisfied.

No other changes were announced in relation to SARP.

Tackling offshore tax evasion

The Irish Revenue will be carrying out a comprehensive programme of targeted compliance interventions.  They will be focused on offshore tax evasion.

Revenue will be paying attention to information it receives under FATCA, EU and OECD information exchange initiatives etc.

From 1st May 2017, individuals involved in illegal offshore tax planning will not have the opportunity to make a qualifying voluntary disclosure.

Also, legislation will introduce a new strict liability offence, for failure to return details of offshore assets/accounts.

Consultation on modernising PAYE

Minister Noonan announced a Revenue consultation regarding the proposed modernisation of the PAYE system to take effect from 1^st January 2019.

The consultation process will begin today regarding the implementation of a real time PAYE / Tax reporting regime for employers.   He advised that it would be similar to that which currently operates in the UK.

 OTHER MEASURES

• There was no change to the VAT rates.  The 9% VAT rate applying to tourism related activities remains unchanged.

• The Minister intends to extend mortgage interest relief to 2020. The details of the extension will be set out in Budget 2018.

• A tax on sugar-sweetened drinks will be introduced in 2018.  This will coincide with a similar regime in the UK. A public consultation on the form and implementation of the tax was released today by the Department of Finance. It will run until 3^rd January 2017.

• The excise duty on a packet of twenty cigarettes will increase by 50c (VAT inclusive) from midnight tonight.  A corresponding pro-rata increase will also apply to other categories of tobacco products including smoking tobacco, cigars, etc.

• There is no change to the excise duty on alcohol or fuel.

• The qualifying limit on excise duty for Microbreweries was extended. This will reduce the standard rate of tax (alcohol products tax) by 50% on beers produced in Microbreweries where the output is 40,000 hectolitres or less per year.  Previously the limit was 30,000 hectolitres.

• VRT relief on the purchase of electric vehicles is extended by five years.  The VRT relief for hybrid vehicles is to be extended by two years.

• Relief from carbon tax is being introduced to promote the use of “green fuels.”   In other words, solid fuels that include a biomass element.

For further information, please click: https://www.gov.ie/en/department-of-finance/collections/budget-2017/

If you are looking for an experienced, independent, professional and qualified Chartered Tax Advisor to effectively handle your tax affairs and provide you with peace of mind, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information.  However, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Income Tax, Corporation Tax, Capital Gains Tax, Capital Acquisitions Tax, VAT, Stamp Duty, Revenue Audits and Investigations

Are you aware of how many changes to our tax system have been implemented between 1st January 2016 and today?

The Irish tax system is constantly evolving.  The Revenue Commissioners are consistently revising their tax guidance material under all tax heads including Income Tax, CGT, CAT, VAT, PAYE/PRSI/USC, Corporation Tax, Stamp Duty, PSWT, etc.

• eBrief No. 52/2016: Requirement for Security Bonds Section 960 S TCA 1997

• eBrief No. 51/2016: Rental Income

• eBrief No. 50/2016: Recent enhancements to VAT Return of Trading Details (RTD) in ROS

• eBrief No. 49/2016: Tax Treatment of Flight Crew Members

• eBrief No. 48/2016: Non-Filing of Returns – Prosecution and Penalty Programmes

• eBrief No. 47/2016: Revised tax treatment of royalty income, with effect from 1 January 2016, under the terms of the Ireland-Estonia Double Taxation Convention 1997

• eBrief No. 46/2016: Corporation Tax (CT1) Returns for 2015 and 2016, Forms 46G (Company)

• eBrief No. 45/2016: Mandatory eRepayments

• eBrief No. 44/2016: Tax and Duty Manual Part 17-01-03 (Profit Sharing Schemes)

• eBrief No. 43/2016: Clarification of circumstances where a CGT clearance certificate is not required

• eBrief No. 42/2016: VAT – “Cancellation of a registration number – special provisions for notification and publication” (section 108D)

• eBrief No. 41/2016: Termination of carry forward of certain unused capital allowances beyond 2014

• eBrief No. 40/2016: High Income Individuals Restriction – Specified Reliefs

• eBrief No. 39/2016: Disclosure by Revenue of taxpayer information – Finance Act 2015 changes

• eBrief No. 38/2016: Surcharge for Late Submission of Returns

• eBrief No. 37/2016: New appeals process – issuing of Revenue ‘settlement’ letters

• eBrief No. 36/2016: Payment and Receipt of Interest without Deduction of Income Tax

• eBrief No. 35/2016: Tax and Duty Appeals Manual

• eBrief No. 34/2016: Change of Responsibility for e-Tax Clearance from 1st April 2016

• eBrief No. 33/2016: Increased compliance interventions in the construction sector – application of the Reverse Charge for VAT and other matters

• eBrief No. 32/2016: Guidelines for Using the Court Process to Pursue Tax Liabilities

• eBrief No. 31/2016: ROS – Extension of Pay & File Deadline for ROS Customers for 2016

• eBrief No. 30/2016: Commencement of new tax and duty appeals process

• eBrief No. 29/2016: Sub-Postmasters and Social Welfare Branch Managers – Tax and PRSI

• eBrief No. 28/2016: Credit in respect of tax deducted from emoluments of certain directors and employees – Section 997A TCA 1997

• eBrief No. 27/2016: Health Expenses section 469 Taxes Consolidation Act 1997

• eBrief No. 26/2016: Taxation Treatment of Termination Payments on Retirement or Removal from Office or Employment

• eBrief No. 25/2016: Gross Roll-Up Life Assurance Policies

• eBrief No. 24/2016: Order of offset of income tax reliefs, allowances and deductions

• eBrief No. 23/2016: Bus, Rail, and Ferry Passes

• eBrief No. 22/2016: Return by employer of employees who availed of relief under the Special Assignee Relief Programme (SARP)

• eBrief No. 21/2016: Transition to the reformed tax and duty appeals process

• eBrief No. 20/2016: Revenue launches dedicated Tax Avoidance webpage

• eBrief No. 19/2016: Procedures to follow when Issuing S110 VAT Estimates/Amended Estimates

• eBrief No. 18/2016: Agents Guide to Collector-General

• eBrief No. 17/2016: Average Market Mid-Closing Exchange Rates v Euro

• eBrief No. 16/2016: Guidelines for Phased Payment/Instalment Arrangements

• eBrief No. 15/2016: Exemption in respect of certain payments under employment law

• eBrief No. 14/2016: Relief from tax for certain start-up companies

• eBrief No. 13/2016: Finance (Local Property Tax) (Amendment) Act 2015

• eBrief No. 12/2016: VAT on eServices Scheme (VOES) / Electronic Services Scheme (ESS)

• eBrief No. 11/2016: Guidelines on PAYE/PRSI/USC/LPT monthly and annual estimates

• eBrief No. 10/2016: Exemption in respect of water conservation grant

• eBrief No. 09/2016: Exemption in respect of certain expenses of State Examinations Commission examiners

• eBrief No. 08/2016: Exemption in respect of certain expense payments for relevant directors

• eBrief No. 07/2016: ROS Digital Certificate renewals 2016 – reminder to save your new Certificate

• eBrief No. 06/2016: Exemption in respect of fuel grant

• eBrief No. 05/2016: Home Carer Tax Credit

• eBrief No. 04/2016: Taxation of Community Midwives employed by the Health Service Executive

• eBrief No. 03/2016: Finance Act 2015 – Stamp Duty Provisions

• eBrief No. 02/2016: eRCT payments to subcontractors for 12-month period 1 January 2015 to 31 December 2015

• eBrief No. 01/2016: Tax Treatment of Married Couples

If you are looking for a qualified Chartered Tax Advisor to help you navigate through the complexities of the Irish tax system, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Capital Gains Tax (CGT), Share Buy Back, Limited Company, Income Tax Treatment, Distributions

What happens in a Share Buy Back Situation?

Providing the shareholder meets the necessary statutory conditions, the company can buy back its shares from that shareholder thereby allowing them to get the benefit of the Capital Gains Tax treatment as opposed to the more costly Schedule F Treatment.  In other words if the CGT Treatment doesn’t apply, any payment for the shares in excess of the amount the company originally received for the subscription of those shares will be treated as a distribution under Section 130 TCA 1997 and will be liable to Income Tax at the shareholder’s marginal rate plus PRSI plus Universal Social Charge.  Generally the only occasions where funds can be extracted from a limited company without the recipient being exposed to tax at his/her marginal rate of income tax are:

(i) on a repayment of capital at par or

(ii) on the sale/disposal of the shares or

(iii) on a liquidation.

What are the typical scenarios?

1. The departure of a disgruntled Shareholder.

2. The retirement of a controlling shareholder who wishes to stand aside and make way for new management/the next generation.

3. Situations where one shareholder wants to continue carrying on the trade, the other shareholder would prefer to exit the business and the company has the necessary funds to buy back its own shares.

4. Access to company surplus funds as part of succession planning

5. An outside shareholder who initially provided equity finance but who now wants the return of that finance.

6. A marriage break-up, etc.

What are the rules as outlined in the Taxes Consolidation Act 1997?

Where an Irish resident company repurchases/redeems/acquires/buys back its own shares then any amount paid to the shareholder in excess of the original price paid at issue will be treated as a distribution under Section 130 TCA 1997.

A more beneficial Capital Gains Tax treatment can be applied under Section 176 TCA 1997 providing certain conditions are met.

S176 – 186 TCA 1997 contain the legislative provisions relating to share buybacks as follows:

• The company must be an unquoted trading company or the unquoted holding company of a trading group.
• The shareholder participating in the share buyback must be both Irish resident and ordinarily resident in the tax year in which the share buyback takes place
• The redemption, repayment or repurchase of the shares must be made wholly or mainly for the benefit of a trade carried on by the company or any of its 51% subsidiaries.  It cannot form part of any scheme or arrangement, the purpose of which is tax avoidance.  In cannot be used to enable the shareholder to extract the profits of the company, or any of its 51% subsidiaries, and avoid being treated as having received a dividend.
• The shareholder must own the shares for a period of at least five years ending on the date of the disposal.
• There must be a substantial reduction in the shareholder’s interest following the buy back. Don’t forget, you must include the shares of (a) the shareholder whose shares have been brought back and (b) any associates of that shareholder.  For completeness, the term “associate” includes husband, wife, civil partner and minor child.  The term “substantially reduced” means that there is a reduction in the nominal value of the participating shareholder’s shares of at least 25%.  Another way of saying it is that the shareholder’s remaining shareholding, following the redemption of the shares, cannot exceed 75% of its value pre Buy Back.
• The shareholder must no longer be connected with the company i.e. the shareholder and his/her associates, together, must own less than 30% of the company post buy back.

Under Section 186 TCA 1997, they cannot hold or be entitled to acquire more than 30% of [s186]:

(a) the ordinary share capital of the company

(b) the loan capital and issued share capital of the company

(c) the voting power in the company or

(d) the assets on a winding up in the company.

Let’s go back to the Trade Benefit Test

The repurchase of its shares by a limited company must be made “wholly or mainly for the purpose of benefiting a trade carried on by the company or any of its 51% subsidiaries”.

Tax Briefing 25 provides guidance on the “Trade Benefit Test:”

(i) It must be shown that the sole or main purpose of the buyback is to benefit a trade carried on by the company or of one of its 51% subsidiaries.
(ii) The Trade Benefit Test would be breached if the sole/main purpose was to benefit the shareholder by reducing his/her tax liability as a result of the more beneficial CGT treatment.
(iii) From the company’s perspective, the test would not be met if the sole/main aim was to benefit any business purpose other than a trade.

Situations where the Buy-Back will benefit the trade include:

Where there is a disagreement between the shareholders of the company over its management and that disagreement is or will negatively impact on the company’s trade if the situation were to continue.  Enabling the shareholder to cease his/her association with the company without having to sell his/her shares to a third party would benefit the company’s trade.

Revenue has listed a number of examples which involves the shareholder selling his/her entire shareholding in the company and making a complete break from the company which would benefit the trade.

Revenue also recognises that the shareholder may wish to significantly reduce his/her shareholding and retain a limited connection which the company.  For example, a shareholder with a majority shareholding  wishes to pass control to his/her children but intends to remain on as director as an immediate departure from the business would have a negative impact on the trade.  In such circumstances it may still be possible for the company to show that the main purpose is to benefit its trade.

In circumstances where a company isn’t certain as to whether the proposed “Buy Back” is deemed to be for the benefit of the trade and providing all the other legislative requirements have been meet, Revenue will issue an advance opinion on whether the Buy Back satisfies the “Trade Benefit Test” if requested.

Are there any situations where the above conditions don’t apply?

The conditions as outlined in Section 176 – 186 TCA 1997 will not apply where the shareholder uses the entire proceeds received from the redemption of the shares to:

(a) Settle his/her inheritance tax liability in respect of those shares.  This must be done on or before 31st October in the year in which the CAT is payable in relation to the inheritance of those shares or

(b) Discharge a debt which arose in order to settle this CAT liability within one week of the buy-back;

AND where the shareholder could not otherwise have discharged the tax liability without incurring undue hardship.

Administration

In the event of a company buying back its own shares or those of its parent company it must file a Return within nine months of the accounting period in which the redemption occurred or within thirty days if requested in writing by the Inspector of Taxes.

The Return must include all payments liable to the Capital Gains Tax Treatment.

If any individual connected with the company is aware of any scheme to avoid the “Connected Person’s Rule” they must notify Revenue within sixty days of becoming aware of that information.

Are there any other issues to be considered?

A liquidation instead of a share buyback might be considered for succession planning purposes.

CGT Retirement Relief and CAT Business Property relief can be used to minimise (a) the tax on the transfer of the business/company by the parent and (b) the gift tax for the child receiving it.

For further information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-06/06-09-01.pdf

For all your Capital Gains Tax queries, especially in relation to Share Buy Backs, please contact us on queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Tax Advisor Dublin, Chartered Tax Advisers Ireland, Research and Development Tax Credits

Many Irish SMEs don’t realize they qualify for Research and Development Tax Credits.  Our goal is to demystify the technical requirements and qualify criteria.

Who can claim an R&D Tax Credit?

A company and not a sole trader is entitled to a tax credit for Research & Development.

It is equivalent to 25% of qualifying R&D expenditure incurred in a particular accounting period.

This can be offset against the corporation tax liability.

What about for Accounting periods beginning on or after 1st January 2015?

The base year restriction has been removed, which means the credit is now available on a volume basis as opposed to an incremental basis.

Is the 25% Tax Credit in addition to the normal Case I deductions for trading expenditure?

Yes, it’s in addition to the normal Case I deductions for expenditure incurred against trading income.

This may result in a corporation tax refund.

For a 12.5% taxpayer, this can result in a net subsidy of 37.5%.   In other words,  12.5% corporation tax deduction + 25% R&D tax credit.

It’s important to be aware, however, that certain restrictions apply to limit the extent of the refund.

 What are “Qualifying R&D Activities”?

Revenue guidelines state that qualifying R&D activities must:

• Be systematic, investigative or experimental in nature,

• Be carried out within a Revenue approved field of science and technology,

• Involve basic research, applied research or experimental development,

• Seek to achieve scientific or technological advancement, and

• Involve the resolution of scientific or technological uncertainty

 What areas are considered for “qualifying” R&D Activities?

• Natural sciences including food science, software development, chemical sciences, biological sciences.

• Engineering and technology including mechanical, material, electronic, electrical, and communication engineering, food and drink production.

• Medical sciences including basic medicine, clinical medicine, health sciences.

• Agricultural sciences including forestry, fisheries, veterinary medicine.

Points in relation to “qualifying” expenditure:

1. Expenditure covered by grant assistance received from the State (i.e. the EU or EEA) does not qualify for the credit.

2. Eligible expenditure includes expenses such as salaries, overheads, materials consumed, etc. which are allowable trading deductions for the purposes of computing corporation tax.

3. Expenditure incurred on plant and machinery may also qualify as R&D expenditure.   To do so, however, it must be eligible for wear and tear capital allowances and must be used for the purposes of R&D activities.

4. Expenditure incurred on R&D activities outsourced to a third-party or to third level institutions may also qualify as R&D expenditure for the purposes of the R&D Tax credit.  This is subject to certain conditions:

• Payment to a third party is limited to the greater of 15% of the company’s overall R&D spend or €100,000.

• The payment to a third level institution/university is limited to the greater of 5% of the company’s overall R&D spend or €100,000.

• Total amount claimed must not exceed the qualifying expenditure incurred by the company itself in the period. „

• The company must notify the third party provider in writing that it cannot also claim the R&D tax credit for the work it has been contracted to carry out.

5. Companies who build or refurbish buildings or structures for both R&D and other activities may claim an R&D tax credit in respect of the portion of the construction and/or refurbishment costs that relate to R&D activities.

• To qualify, the company must be entitled to claim industrial buildings capital allowances on the building. It’s important to bear in mind that the cost of the site is excluded.

• A minimum of 35% of the building must be used for conducting R&D activities for a four year period.

• The building must be used for R&D for a period of ten years.

• The relief will be clawed back if the building is sold or ceases to be used within ten years by the company for research and development activities or for the same trade as when the building is first brought into use.

• An R&D tax credit of 25% of relevant expenditure can be claimed in full in the year in which the building is first put into use for the purpose of the trade.

The order of offset of the R&D Tax Credit is as follows: 

1. Firstly against the current period’s corporation tax liability.

2. Secondly, where the company does not have sufficient corporation tax liability in the current accounting period, that company can make a claim to carry back the unutilised portion of the tax credit against the corporation tax liability of a preceding accounting period of corresponding length.

3. Thirdly, if any portion of the credit remains after making this claim the company can make a claim under Section 766(4B) for a cash refundpayment of this excess in three instalments. Please be aware that this payment is subject to a cap (see below).

4. Finally, any remaining portion of the R&D Tax Credit will be carried forward and offset against the corporation tax liability of the future accounting periods

The amount of cash refund that a company can claim under (Section 7664B) is limited to the greater of:

1. The corporation tax paid by the company during the period of ten years prior to the previous accounting period i.e. prior to the period in which Section 766(4A) TCA 1997 relief is claimed. It’s important to bear in mind that these payments are reduced by any claims already made under Section 766(4B)TCA 1997 in those earlier periods or

2. The sum of the payroll tax liabilities for the period in which the expenditure on R&D was incurred as well as the prior period’s payroll, subject to restrictions if the company has previously made a claim based on its preceding payroll.

Points to keep in mind

• The amount of any payment made by the Revenue Commissioners following a Section 766(4B) claim by a company will not to be treated as income of the company and therefore not included in the CT computation.

• Instead it will be deemed to be a refund of corporation tax.

• By doing this, Revenue Commissioners can offset the payment against any outstanding tax liabilities of the company.

• The company must make a claim for the R&D Tax Credit within twelve months of the end of the accounting period in which the expenditure was incurred.

• If possible the claim should be made when filing the corporation tax return of the relevant accounting period.

• Relief can be claimed for expenditure incurred prior to the commencement of the company’s trading activity.

For further information, please click: https://www.revenue.ie/en/companies-and-charities/documents/research-and-development-tax-credit-guidelines.pdf

For all technical taxation guidance and assistance, please contact us to make an appointment at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Chartered Tax Advisors, qualified Accountants, Payroll Providers, Help with Preparing Tax Returns, Employee/Employer Taxes, Personal Taxes

The Minister for Finance Michael Noonan T.D. presented his 2016 Budget yesterday.   As you can appreciate, Accountants and Chartered Tax Advisors have widely anticipated this Budget.  In it, he outlined a wide range of changes to the Irish tax system with particular emphasis on:

(i) personal taxation,

(ii) initiatives to begin equalising the tax treatment of the self-employed and employees

(iii) as well as steps to support businesses in Ireland.

We will outline the key features of yesterday’s Budget below.

PERSONAL TAX

Universal Social Charge

The Government introduced comprehensive changes to the Universal Social Charge for 2016, aimed at reducing the tax burden on low and middle income earners.

The entry threshold for Universal Social Charge (“USC”) will be increased from €12,012 to €13,000.

Otherwise, rates of USC will be reduced as follows:

• For Income up to €12,012 – Rates reduced from 1.5% to 1%.

• Income from €12,013 to €18,668 – Rates reduced from 3.5% rate to 3%.

• The Income between €18,669 – 70,044 – Rates reduced from 7% to 5.5%

• Income between €70,045 – €100,000 – 8% (no change)

• PAYE Income in excess of €100,000 – 8% (no change)

• Self-employed income in excess of €100,000 – 11% (no change)

The top rate USC exemption will be retained for all medical card holders and individuals aged seventy years and older providing their total income does not exceed €60,000.

 Income Tax

There have been no changes to the income tax rates and bands.

 PRSI (Pay Related Social Insurance) 

Budget 2016 introduced a tapered PRSI tax credit for employees up to €624 per annum.

The entry point to the higher rate of employers’ PRSI of 10.75% will be increased to €376 per week.  This will be a welcome introduction by all employers.  The reason for this tapered PRSI credit being introduced, is to ensure low income earners benefit from the increase to the minimum wage, which will take effect in January 2016.

The credit applies to individuals earning between €18,304 and €22,048 per annum.  it will be subject to a maximum of €12 per week.

Earned Income Tax Credit

The government will be introducing an Earned Income Tax Credit of €550 per annum in 2016.  The aim is to equalise the tax treatment of the self employed with employees paid through the PAYE system.

This new tax credit will be available to individuals who are not eligible for the PAYE Tax Credit.  This includes:

(i) those earning self employed trading or professional income (subject to Income Tax under Cases I and II Schedule D)

(ii) individuals in receipt of Case III Schedule D income as well as

(iii) business owners who, up to now, didn’t qualify for a PAYE credit on their salary.

 Pensions

There was no reference made to tax relief on pensions in this Budget.

The “additional” pension levy of 0.15% will expire at the end of 2015.

Please be aware that the original 0.6% pension levy ended in 2014.

 Home Carer’s Tax Credit

The Home Carer’s Tax credit increased by €190 to €1,000 per annum.

1. An income tax credit worth up to €5,000 per annum for five years was introduced for family farming partnerships to facilitate the transfer of family farms to the next generation.

2. There was an extension of general and young farmers’ stock relief for a further three years.

3. Profits or gains from the occupation of woodlands are being removed from the High Earners’ Restriction.

New tax measures aimed at encouraging and supporting entrepreneurs and small business owners:

• The introduction of a Knowledge Development Box to provide for a 6.25% corporation tax rate on profits arising to certain IP assets which are the result of qualifying R&D activity that is carried out in Ireland. The Minister stated today that the KDB would add “a further dimension to our ‘best in class’ competitive corporation tax offering, which includes the 12.5% headline rate; the R&D tax credit; and the intangible asset regime.”

• The Start-up Relief from corporation tax is being extended for new start-ups commencing to trade over the next three years.  This relief applies where the total corporation tax payable for a period does not exceed €40,000 and the amount of relief available is linked to employer’s PRSI.

• The amendments to the Enterprise and Investment Incentive Scheme (EII) announced in Budget 2015 took effect from midnight. They have been pending EU State Aid approval for the past year.  These included an increase in the annual limit companies can raise to €5 million and an increase in the lifetime cap to €15 million. Investments in the extension, management and operation of nursing homes will also qualify for the EII.

• The cap on eligible expenditure for Film Relief is being increased from €50 million to €70 million subject to State Aid approval.

• The entry point to the top rate of employer’s PRSI increases by €20 per week to €376 per month.

• The scheme of capital allowances for the construction of facilities used in the maintenance, repair, and overhaul and dismantling of aircraft is being amended to comply with State Aid rules. The scheme is also being commenced with effect from Budget night.

 CAPITAL TAXES

• A 20% Capital Gains Tax rate will to apply to the disposal in whole or in part of a business up to an overall limit of €1million in chargeable gains.

• Other than the reduced rate of CGT which applies to the disposal of a business, there has been no change to the Capital Gains Tax rate of 33%.

• The Group A threshold for capital acquisition tax will be increased from €225,000 to €280,000 with effect from 14th October 2015. The Group A threshold typically applies to transfers between parents and their children. The current Class B and Class C thresholds remain unchanged and there has been no change to the CAT rate of 33%.

 Local Property Tax (LPT)

The Budget has extended the Local Property Tax revaluation date for the Local Property Tax from 2016 to 2019. This follows recommendations in the “Review of the Local Property Tax” report which has also recommended exemptions for properties significantly affected by pyrite.

NAMA is to deliver 20,000 houses between now and 2020. 90% of these in the Dublin area and 75% of the overall total will be starter homes.

OTHER CHANGES 

1. The Home Renovation Incentive is being extended until 31 December 2016.

2. The existing €5 Stamp Duty on Debit/ATM cards is to be replaced with a 12 cent charge for ATM transactions.  This is subject to a cap of €2.50 or €5 depending on the card type.

3. The reduced 9% rate for the tourism and hospitality sector will be retained.

4. There will be no changes to the reduced VAT rate of 13.5% or the standard VAT rate of 23% in 2016.

FINAL POINT

This is the first time since the Budget in April 2009 that the marginal rate for middle income earners has fallen below the 50% rate.

UK Taxes. International, Cross Border, Ex-pat Taxes, Business, Personal, Capital Gains Tax

When faced with a large tax bill and the administrative burden of having to file Tax Returns in two jurisdictions, people always regret not getting professional taxation advice BEFORE they completed the transaction.  Over the past number of years I’ve been contacted by several Irish citizens returning home from the UK where they’ve lived and worked for a number of years.  In the majority of cases, these individuals have had difficulty selling their UK homes and, as a result, may have rented them out for a number of years until a suitable buyer was found.  The main question they asked was “Do I have an Irish and a UK Capital Gains Tax liability?”

Up until 5^th April 2015 the UK domestic law did not impose a Capital Gains Tax liability on non residents which meant if you were Irish resident, for example, then you had no exposure to UK CGT on the sale or disposal of a UK asset.  Because the UK domestic tax law didn’t and couldn’t impose a charge to UK CGT on the disposal of the asset by a non-resident then the Double Taxation Treaty didn’t need to be consulted but the individual would have a CGT liability in their place of residence.  Under Section 29(2) Taxes Consolidated Acts 1997, an Irish resident individual only paid Capital Gains Tax in Ireland.

From 5^th April 2015 the UK Government amended the taxation of gains made by non-residents disposing of UK residential property.

The New UK Rules

The new CGT charge on non-residents deals with “property used or suitable for use as a dwelling” and will include residential property used for letting purposes.

There are, of course, exclusions for certain types of property in communal use which include boarding schools, nursing homes and certain types of student accommodation.

What differentiates this new charge from the existing ATED-related CGT charge is that all residential property falling within the definition comes within the scope of this new legislation regardless of the value of the property.

The existing ATED-related CGT charge limited the charge to properties where the consideration on sale/disposal exceeded a specified “threshold amount” which for all gains arising on or after 6^th April 2015 is £1m.

So, who will be affected by this new charge?

The charge will apply to gains made by

• Individuals

• Trustees

• Closely held non-resident companies

• Funds – to the extent that these gains are not within the ATED-related CGT charge

Who will not be affected by this new charge?

Companies and funds which are not closely-held as well as the majority of institutional investors.

Tax rates (UK)

The tax rates for the new CGT charge on non-residents are the same for UK residents who pay CGT at their marginal rate of Income Tax.

What does that mean?

For taxpayers paying at a Basic Rate, the rate will be 18%

For taxpayers liable at the higher/additional rate, it will be 28%.

For non-residents, the rate will depend on their total UK Income and Gains.

Is there an Annual Exemption?

The annual exempt amount for gains of £11,000 is also be available to non-residents.

Paying and Filing (UK)

In circumstances where the non resident person has an “existing relationship” with HMRC and providing the disposal is not exempt, they will be required to file a self-assessment Tax Return following the end of the tax year and make the relevant payment within the usual deadline dates.

A person who does not have an “existing relationship” must submit a Tax Return and make the appropriate tax payment within thirty days.

What about Tax Returns requiring Amendments?

Amendments or changes to these Tax Returns are allowable within the twelve months following the normal filing date for the tax year in which the disposal is made.

In Summary

• For non-residents disposing of UK residential property, Capital Gains Tax was not an issue up until 6th April 2015.

• With the introduction of the new legislation, which takes from 6th April 2015, non resident individuals, trustees and/or closely held companies or funds may be exposed to a UK CGT Charge.

• Non-resident individuals, trustees or closely-held entities can avoid a CGT charge on a disposal of UK residential property where the property qualifies for Principal Private Residence Relief.

• The new legislation governing Principal Private Residence Relief has prevented some non-residents from claiming the CGT relief.

• Under this new rule, a residence will not qualify for PPR for a tax year unless (a) the person making the disposal is tax resident in the country where the property is located for that tax year or (b) the person spent at least 90 days in that property in that tax year.

• Non-residents can defer the payment of the CGT due until the self-assessment filing date provided they register with HMRC.

For further information, please click: https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-calculating-taxable-gain-or-loss

If you have returned from the UK and you are looking for accurate and up-to-date UK Tax advice or you are seeking UK Tax Consultants with specific HMRC experience, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Capital Gains Tax (CGT) Payments, Disposal of an asset, Investment, Shares, Property, Business Sales.

If you’ve already made or about to make a disposal of a capital asset (e.g. if you have sold certain shares, an investment property, a business, etc.) anytime  between 1^st January and 30^th November 2014 you will be obliged to pay your Capital Gains Tax by 15^th December 2014.  If you decide to wait and dispose of your asset between 1^st December and 31^st December 2014 then your Capital Gains Tax (CGT) payment will be due by 31^st January 2015.

 What happens if you miss these deadlines?

 Interest of 0.0219% per day will be applied to all late payments of Capital Gains Tax.

 What happens if you make a gain in the first part of the year and a loss in the second part?

 Even if you’ve made an overall loss for the year, you will be obliged to pay the Capital Gains Tax arising on any gain you’ve made in the first part of 2014 by the specific payment date being 15^th December 2014.

 You can then submit your claim for a tax refund in January 2015 if a loss arises in the second part of the year.

 Any tax saving tips?

 Plan the timing of your disposals so that capital gains and capital losses arise in the same period thereby enabling you to offset the losses against the gains and effectively reduce any potential tax liability.

 This can be very useful from a cash flow point of view.

 What about filing obligations?

 You must include details of all your capital acquisitions and/or disposals made in 2013 in your 2013 Income Tax Return. 

 This Return must be filed with Revenue by 31^st October 2014.

 There is an extension to 13^th November 2014 if you are using the Revenue Online System (ROS).

 What happens to individuals who are not obliged to file an Income Tax Return?

 You may file a CG1 Form which can be downloaded from the Irish Revenue website www.revenue.ie

 As with the Income Tax Return, the due date for filing is 31^st October 2014.

 Please be aware, there is no facility to file this Form online which means the 13^th November 2014 extension does not apply to the CG1 Form.

Are there any penalties for late filing?

 If you are late filing your Tax Return but manage to do before 31^st December 2014 there will be a 5% surcharge of the amount of tax payable up to a maximum of €12,695.00.

 If you file your Return after 31^st December 2014 a 10% surcharge will be levied up to a maximum amount of €63,485.00.

For further information, please click: https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/index.aspx

For all your Capital Gains Tax advisory or compliance issues, please contact us on queries@accountsadvicecentre.ie.

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.